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Wednesday, August 12, 2015

Market Summary -- 12th Aug 15

FTSE STI closed 3,061.49, down 91.57 points or -2.90% with a total volume of 1.76b and a total value of S$2.15b. Total number of advance vs decline was 96 vs 432. Of the 30 component index stocks, 1 closed positive and 29 in the red. The only gainer component stock was :-

US markets fell average at least 1% yesterday and Asian bourses continued the sell off from yesterday with Nikkei -1.58%, SSE -1.03% and HSI -2.38%. STI fell 2.90%, the biggest one day drop for the year in moderate volume and value with only 1 of the 30 index stocks posted gain.

The reaction to China surprise yuan devaluation was none other than market sell off for US stocks. The global sell off continued for Asian markets for the day. Investors feared on start of currency war with China latest move. The yuan devaluation would have helped China export which has been declining for past months but served as disadvantages to rest of the world making it more expensive to export to China. The latest move could eventually force US Fed to rethink about its tightening policy in which most expecting a rate hike next month. USD strengthen in reaction to yuan devaluation and should US Fed decides to hike rate next month, that would further strengthen the USD which already hitting US tech companies revenue even more. US labor market might be recovering based on the recent data but the overall economy showed otherwise. US Fed has to think carefully now !

STI suffered the biggest one day drop for the year. With yesterday weak set of 2Q GDP and the surprise yuan devaluation which will be hurting Singapore export activities further it will come at no surprise Singapore GDP will suffer another contraction in Q3 thereby entering a technical recession. That worries caused another selling across the board in STI. The 3 banking stocks all down by at least 4% suffered the most and weighing down the index. Short-term sentiment might be very bearish but the selling down has created nothing but cheap valuation for bargain hunting.